Article On Fear

T2W Bot

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Traders will find it next to impossible to work their way through the typical book on trading without being exposed to the subject of “controlling one’s emotions”. Indeed, the conventional wisdom demands that controlling one’s emotions is absolutely essential to trading success. And, technically, that’s true. If one has them. But, contrary to conventional wisdom, emotions are not an unavoidable component to trading (granted, those who insist that emotions are unavoidable consider the selection of a shirt or of sunny-side up vs over easy to be emotional decisions, but this is about neurotic behavior: addictive, compulsive, illogical, irrational, obsessive, self-defeating, self-damaging behavior; revenge trading is neurotic behavior; cutting profits short and letting losses run is neurotic behavior).
By “emotions”, the Wise are referring to The Big Three: Fear, Hope, and Greed. And withstanding all of these, much less controlling them, can seem insurmountably difficult. Hope...

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tokyojoe

Established member
874 289
This is a great read, 100% behind the scratch, have been for ages, I have no interest whatsoever in large drawdown with "hope" for it to turn"

Enter, correct ? yes ? hold, get that trailer in at a sensible spot if it runs.

Enter correct ? no ? out/scratch/bail/jeronamo.......Free up emotional capital as well as potential black hole money pits, "let it breathe" some say, yea & I say bail & let it & feel out just how far those other stops are......& then the layer below that.....& the layer below that.....(same for the upside)

After some time obseving the live charts & going through a ringer or two & sounding out a comfortable position size etc, the price reading becomes second nature, it is then down to speed of flow & relative accuracy of the price quote offered compared to the dma.

Thanks for sharing.

TJ
 
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superfly

Established member
512 44
how to transform the fear and the reality of being stopped out in ultra effective ways to mitigate the probability and impact of being stopped out. In your pdf you talk about a three legged stool, I think, with this you cover the fourth legg.

regards
 
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dbphoenix

Legendary member
6,953 1,260
I suppose I ought to let the comments stand as they are, but this one niggles as it is representative of a commonly-held attitude regarding who or what is in control of the trade. And if I'm misinterpreting your comment, my apologies.

A great many traders talk of "being stopped out" as though they are a bug on the pavement and the market is a steam roller. It is important when confronting the issue of fear to understand that "being stopped out" must not be shorthand for "the market stopped me out" because to do so gives the market the authority and the power to manage one's trade for him, and that means relinquishing one's responsibility not only for entering the trade in the first place but managing it as well.

What "being stopped out" ought to mean to the emotionless trader is that the price movement subsequent to the entry suggested that the entry was incorrect, and "I was stopped out" is more accurately as "I exited the trade (for whatever reasons)". The former hands the responsibility for the trade and its outcome to "it" or "them". The latter keeps it firmly in the trader's grasp.

In order to realize this state, the trader must of course define exactly what it is he wants to see to show him that he was/is right and exactly what it is he wants to see to show him that he was/is wrong. In this way, he is always in control of his trade, shades firmly in place, defying the headlights to blind him.

The market cannot harm the trader unless and until he gives it permission to do so,
 

superfly

Established member
512 44
What "being stopped out" ought to mean to the emotionless trader is that the price movement subsequent to the entry suggested that the entry was incorrect, and "I was stopped out" is more accurately as "I exited the trade (for whatever reasons)". The former hands the responsibility for the trade and its outcome to "it" or "them". The latter keeps it firmly in the trader's grasp.

Hidding my stops behind relative long duration (high volume) narrow price ranges makes me emotional ;). how to cultivate the right trading perception, rituals and emotions, isnt it?

By the way I use something as Slaa but I track Supply and demand seperatly, and Im only allowed to take action if one is dominant

cheers
 
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forker

Senior member
2,688 500
Looking back on my own path, fear of being wrong meant not having an edge. It took me years to realise, and internalise (from Mark Douglas -bless his soul) that losing is inevitable. I've been down the road of revenge trading and just about everything else associated with fear. When I started to concern myself more with managing a trade by tightening stops until break even and setting realistic and obvious targets that conform to a good ratio. It wasn't until this point in my own path did I sart turning things around. Over time the fear dropped away and more focus became possible which improved my results.
 

tar

Legendary member
10,443 1,313
Fear , Greed .. etc are in human's nature , it is not wrong to have these feelings as a trader , we are not algos , even algos can be fearful and can panic at times - flash crash - hence they are built by humans . What matters is how you react when you have these feelings , do you lose the plot , do you revenge trade and blow up your account , do you turn a small loss to a big one , do you go on with your trading plan .. etc .
 

dbphoenix

Legendary member
6,953 1,260
The fear addressed in the article is a fear of the unknown. The task for the fearful is to transform the unknown to the known, at which point he can manage it as objectively and rationally as he does any other protocol.
 

dbphoenix

Legendary member
6,953 1,260
From the attic:

I'm noticing a possible pattern concerning my own (virtual) trading: for various reasons (either they were too risky, or not the right time of day, or for some other reason), I've passed on a number of potential entries that would have been successful. It's possible that my objections to these entries (essentially, my fears that they will not succeed) are unfounded. More testing needed.

Why do you say "fears that they will not succeed"? Can you elaborate?

Well, this gets right to the reason why I believe I need to have a tested trading plan. Essentially, I have no empirical reason NOT to take these trades. I don't really have any evidence that the entries would succeed either, but they do fit in with my understanding of how the dynamics of price action were working. However, I'm beginning to suspect that I may be avoiding these trades because at some level I do not think they would succeed.

The word "fear" may be a bit strong here (and maybe I'm just overly influenced by the last chapter of Steenbarger I've been reading -- where he talks about behavior modification by facing up to one's fears), but certainly I'm interpreting the price action I'm seeing through some kind of filter, attempting to make entries only at times when I think the chances of success are greatest. So, I guess what I'm really wondering is whether I'm allowing some emotional response (based on unknowns -- the effect of extremes in volatility on my setup) to prevent me from making entries I otherwise probably would have made.

There's another, deeper issue here as well -- concerning the willingness to accept and take losses in one's trading. On this score, I've moved along the spectrum from a real unwillingness to accept and take losses, to a grudging acceptance of the need to take losses (viewing them as sort of a "necessary evil"), to the point where I see losses as inevitable, and something to minimize.

Intellectually, I understand how one could reach the point of total nonchalance concerning losses, but I think one must have some probabilistic basis for such an attitude. Basically, if you know that x percent of the time your entry will result in a loss, but overall the strategy/setup is profitable over time, I believe losses become completely routine. THAT is the point I'm attempting to reach through the process of testing and creating a trading plan.

You've pretty much wrapped it all up in this post. We want to be intuitive. But unless one is exceptional, there are no shortcuts to this level (and if one is not exceptional, he will find out rather quickly). So we take or don't take a trade based on what we think or feel or intuit when in fact we are acting or not acting based on some subliminal fear. In other words, we don't take a trade because we "intuit" that it won't succeed, but we in fact don't take it because we are afraid that at bottom we have no idea what we're doing, we don't want to fail, we can't afford to lose, etc. The doubt and anxiety freeze us, and whatever intuitive sense we may have has been buried in the muck.

Which is why the testing is so important, and the experience, which is both a companion to and a consequence of the testing. That is, it's not just the testing that bolsters confidence but the experience that one has gained by having gone through the testing in the first place, regardless of the outcome of the testing.

As for the willingness to accept the loss, that's a biggie, and not just the willingness to accept it but to embrace it. If loss disturbs the trader in any way, then he hasn't accepted the fact of it. This alone prompts a number of self-sabotaging behaviors: getting revenge on the market, over-trading to compensate for loss, failing to take every trade that the strategy calls for, reluctance to pull the trigger, chasing price after having been reluctant to pull the trigger, etc. If one believes that he must win, that loss is unacceptable, that he must have made an error if he took a loss, losses will become debilitating. And if one is unfortunate enough to begin trading for real at the beginning of what Yoder calls the "payout cycle", he can suffer a significant setback to his self-confidence.

There are those who believe that if one is not trading intuitively, he isn't trading. This is unrealistic. Perhaps at some point one will "get it". Or perhaps he never will. Does that preclude him from trading? Not necessarily. If he can develop a system that he trusts, he will put himself in the position of trusting his system rather than his intuition. Of course, since he developed the system, he will in a sense be trusting himself in either case (this does not apply if one uses somebody else's system). However, trusting the system (or strategy or whatever one wants to call it) is not quite so fuzzy as trusting one's intuitive sense. The system is also more easily fixed.

When you reach those "inflection points" where you must decide whether to pull the trigger or not, based either on your system or your intuition, put your thoughts into words. Be your own coach and explain to yourself, out loud, just what it is that's going through your head -- and what you're feeling -- at the moment you have to make that decision (this is difficult to do in "chat"). Get a digital voice recorder rather than try to write all this down, then review your explanation/analysis/rationalization at the end of the day when you aren't on the spot and can be more objective. Use your charting program's replay function at the same time you play your recording. At the very least, this exercise may help you clarify and separate what's going on with you intuitively and what's going on with regard to your perception of your system.
 

Lúidín

Established member
818 61
<span>"3. Where are you going to enter a breakout? A tick above the upper limit of the range? Two? A point? Two? Are you going to use a hard stop? How much? Will it be fixed or trailing? When will you move it to breakeven? Why there and not someplace else?"

when you get confirmation that the breakout is valid..stop/trailing will be detrmined by chart timeframe you are using..breakeven will depend on momentum..and..what about the target level???</span>
 

foroom lluzers

Veteren member
3,611 137
This article when placed in the whole context of trading pschology , is of no use to any real trader .According to the author/vendor , fear is the only psychological demon that traders will encounter .I am afraid the author is incorrect about this point , and some of the other psychology threads have way superior content .

Just search google or this forum to hear about full trading psychology with following words individually in every search "t2w fear , trading psychology , emotions , amygdala Hijack , stress response ,trader's personality , the need to be right , mental preparations for traders , hippocampus shutdown , cognitive biases , wired to lose , mark douglas , mindfullness , self sabotage for traders , traders and uncertainty , stress responses reactive patterns and when mind reverts to subconcious responses".
 

foroom lluzers

Veteren member
3,611 137
Fear of getting chopped out :Trade breakdown
Fear of stop loss is going to be hit
Fear of losing
Fear of being wrong
Fear of mistiming the trade
Fear yourself as your own enemy
Fear of being on the wrong side of the market
Fear your emotions
Fear of missing out
Fear of profits turning into losses
Fear of closing out early
Fear of not making weekly profit

Just a few of the fears
 

foroom lluzers

Veteren member
3,611 137
Your obsessions are distorting your reality.

Look in the mirror and ask yourself the same question.

Rande Howell's view below

http://www.trade2win.com/articles/1630-beyond-fear-developing-your-inner-trader

The answer is rarely. Mastering fear is the start of a journey. As jarring as this realization may be to a trader battling his fears, this is only the first, and foundational, step into the transformation of the self required to become a successful trader.
 
 
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